The share price of Guangzhou Pharmaceutical Co climbed Monday after the company announced a favorable court verdict it received in the dispute over Wong Lo Kat trademark.
Guangzhou Pharmaceutical shares Monday reached as high as 33.76 yuan ($5.3), rising by the maximum 10 percent allowed in daily trading before closing at 31.28 yuan, up 1.92 percent than the previous trading day, while the benchmark Shanghai Composite Index closed down 1.47 percent.
In a statement filed with the Shanghai Stock Exchange Monday, Guangzhou Pharmaceutical said that the Beijing First Intermediate People's Court had rejected Hong Kong JDB Group's appeal to revoke a previous ruling made by the China International Economic and Trade Arbitration Commission over the ownership of the Wang Lo Kat brand.
The commission ruled on May 9 that JDB Group, which operated Wong Lo Kat since 1997, was not authorized to use the brand's trademark after May 2010, a verdict enabling Guangzhou Pharmaceutical to regain the trademark.
This final ruling by the Beijing court has ended the long running dispute between the two companies over the usage of the trademark for their herbal tea products.
Hong Kong JDB Group did not comment by press time.
"But Guangzhou Pharmaceutical's red-canned Wong Lo Kat packaging might have infringed the rights of JDB," said Duan Junfeng, an IPR lawyer with Beijing-based George Wu & Partners Law Firm.
Guangzhou Pharmaceutical launched two packages in June, red-canned and green paper carton Wong Lo Kat herbal tea. Meanwhile, JDB Group had also launched a massive advertising campaign for its red-canned herbal tea, with JDB printed on both sides of the packaging.
JDB Group first introduced and used the red-canned packaging, which should be regarded as exclusive usage right under the Anti-Unfair Competition Law, Duan said.
Guangzhou Pharmaceutical projected on May 21 that its red-canned Wong Lo Kat herbal tea will achieve sales revenues of 30 billion yuan by 2017 and 60 billion yuan by 2020.
"The major challenge for Guangzhou Pharmaceutical is managing its sales team for beverage products, which is different from its core business of drugs," Zhao Yong, a food and beverage analyst with Haitong Securities, told the Global Times.
The company recently set up a sales force of 2,000 people for selling herbal tea under the Wong Lo Kat trademark and approved more than 30 companies to produce the drinks.
"About one third of consumers prefer to buy JDB herbal tea, and the supply of red-canned Wong Lo Kat is very limited," Lu Yuejun, a distributor of Guangzhou Pharmaceutical's Wong Lo Kat herbal tea in Nanning, Guangxi Zhuang Autonomous Region, told the Global Times.
Lu said that Guangzhou Pharmaceutical still faces production problems and it prioritizes supplies to first-tier cities.
Distribution of the herbal tea products will bring in sales revenues and profits to Guangzhou Pharmaceutical in the short term, but whether the company can achieve long-term success remains unclear, He Pingge, an analyst with Guosen Securities, wrote in a recent research report.